Mandelson triggers new round in trade war over aircraft subsidies

Peter Mandelson, the European Union Trade Commissioner, launched a tit-for-tat legal action against the US yesterday over aircraft subsidies. The move paves the way for the largest trade battle in modern history.

Peter Mandelson, the European Union Trade Commissioner, launched a tit-for-tat legal action against the US yesterday over aircraft subsidies. The move paves the way for the largest trade battle in modern history.

He accused the UD of failing to act in an even-handed way. "America's decision will, I fear, spark probably the biggest, most difficult and costly legal dispute in the World Trade Organisation's history," Mr Mandelson said. "It will be hard fought on both sides and I can assure you Europe's interests will be fully defended."

The move came hours after the US announced it was taking its case against subsidies for Airbus to the WTO, calling a halt to months of diplomacy. Mr Mandelson said he had consistently tried to resolve the eight-month dispute through negotiation but said the US had refused to discuss anything other than an immediate end of launch investment for Airbus. He said: "I have found the US has never wanted to engage in a serious, even-handed discussion of the much larger subsidy programmes for Boeing."

He said it was "regrettable" the Americans had rejected negotiation but it had become clear there was "no appetite for compromise" in Washington. He said he was confident that launch investment for Airbus was compatible with WTO rules but said the US was "vulnerable" on what Boeing received.

The issue came to a head after Airbus applied to the British, French, German and Spanish governments for billions of pounds of aid for the launch of its latest jet. The A350 is a direct competitor to Boeing's new 787 Dreamliner in the market for mid-size, long-distance jets.

On Monday, the EU offered to cut aid to Airbus and suggested the two sides continue talks. US trade officials reacted by saying the offer did not go far enough, especially since the EU was planning to commit $1.7bn (£935m) in new launch aid to Airbus.

Mr Mandelson said the US move was ironic because the WTO action allowed EU governments to offer Airbus the aid it needs to launch the new model."If the Americans had opted for a deal I offered on the table, and accepted a negotiated settlement, they would have immediately seen a sharp reduction [in aid]," he said. "This will take years to resolve and in the meantime it's open to Airbus to receive any amount of launch investment from member states prepared to make that investment."

The US Trade Representative's office said the EU move had been expected. "We prefer a negotiated outcome, but since some European member states are clearly moving to grant launch aid, our hand has been forced."

Trade lawyers said the dispute could hang over relations between the two blocs for up to two years as the case progressed through the WTO.